Meck Executive Summary

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Executive Summary Statement of the Problem LAB Pharmaceuticals does not have enough capital to finance the testing of Davanrik, an antidepressant drugs that has potential side effects relating to obesity. LAB approaches Merck & Co., Inc. (Merck) and asks the company to license Davanrik, as well as funding the clinical testing. Merck must decide whether or not to bid to license Davanrik and if so, at what price. Discussion Merck is facing patent expiration problem because most of its popular drugs are going to expire by 2002. Patent expiration will lead to a substantial loss of sales. Therefore, Merck must develop new compounds quickly to refresh its portfolio and counter the loss of sales. Licensing Davanrik with LAB would…show more content…
Exhibit TN-2Decision Tree Analysis %($30) 60% 40% ($0) 10% 15% 5% 70% ($0) 85% 15% ($0) 75% 25% ($0) 70% 15% 5% Launch: Depression Launch: Weight Loss Launch: Dual Claim Launch: Depression Launch: Weight Loss ($40) ($200) ($150) ($500) 10% ($0) ($250) ($100) ($400) ($250) ($100) ($0) $1,200 $1,200 $345 $345 $2,250 Phase I Success Phase I Failure Phase II Failure Phase III Failure Phase III Failure Phase III Failure In-License Do Not License Pursue Depression Pursue Dual Pursue Weight Loss Phase III Success Phase III Success Phase III Success Phase III Success Phase III Success ($70) $680 5.1% $34.7 ($270) 0.90% $25 6.75% $1.7 ($220) 2.25% ($5.0) $380 0.45% $1.7 ($30) 0.4% ($12.0) 42% $1,280 2.1%

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